Reuters World News Highlights at 1035 GMT, Feb 26

ROME - The Italian stock market fell and state borrowing costs rose on Tuesday as investors took fright at political deadlock after a stunning election that saw a protest party lead the poll and no group had a clear majority in parliament.

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ALMATY - World powers are expected to offer Iran limited sanctions relief on Tuesday if it agrees to halt its most sensitive nuclear work, in a new attempt to resolve a dispute that threatens to trigger another war in the Middle East.

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HONG KONG - China is expanding its long-neglected fleet of supply ships and heavy-lift aircraft, bolstering its military prowess in support of missions to enforce claims over disputed territory and to defend Chinese interests abroad.

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JERUSALEM - A rocket fired from Gaza exploded in Israel on Tuesday, the first such attack since a November truce and an apparent show of solidarity with West Bank protests after the death of a Palestinian in an Israeli jail.

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MOSCOW - Syria is ready for talks with its armed opponents, Foreign Minister Walid al-Moualem said on Monday, in the clearest offer yet to negotiate with rebels fighting President Bashar al-Assad.

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CAIRO - A hot air balloon crashed near the Egyptian town of Luxor at dawn on Tuesday after a mid-air gas explosion, killing 19 Asian and European tourists, a local industry official and the state news agency said.

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HAVANA - When Cuban President Raul Castro named former engineering professor and long-time Communist Party insider Miguel Diaz-Canel as his first vice president and potential successor on Sunday, he chose managerial skills over flair.

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WASHINGTON - The White House escalated a campaign on Monday to convince Americans dire consequences await if government spending cuts go ahead on March 1, warning of a slowdown in global trade, a stalled fight against cancer and Alzheimer's disease and compromised security at U.S. borders.

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NEW ORLEANS - A long-awaited trial over the biggest U.S. offshore oil spill began on Monday, with governments, businesses and individuals blaming BP Plc mostly for the 2010 disaster that killed 11 rig workers and spilled 4 million barrels of oil into the Gulf of Mexico.

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MADRID - A former treasurer of Spain's ruling party, at the heart of a corruption scandal that has hurt Prime Minister Mariano Rajoy, was ordered to surrender his passport on Monday while judges investigate millions of euros he deposited in Swiss banks.

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CARACAS - From a billboard bearing his face, to a giant inflatable doll and posters hawked on the street below, there is no shortage of images of Hugo Chavez at the Caracas military hospital where he has been since returning from Cuba.

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OSLO - Global warming may have caused extreme events such as a 2011 drought in the United States and a 2003 heatwave in Europe by slowing vast, wave-like weather flows in the northern hemisphere, scientists said on Tuesday.